How does ST face the global semiconductor industry recession?

There are signs that the global semiconductor industry is entering a recession. According to the latest forecast data from IHS Markit, the global semiconductor chip industry's revenue will drop by 7.4% in 2019, from $482 billion in 2018 to $446.2 billion in 2019. The optimism of many chip manufacturers is turning into concern that the semiconductor industry will have a "bad" year.

So how will STMicroelectronics, which spans multiple electronic application fields, respond? After all, in Q1 2019, ST's net revenue totaled US$2.08 billion, a year-on-year decrease of 6.7%; gross profit totaled US$818 million, a year-on-year decrease of 7.9%. Although the market was weak in Q1 2019, ST believes that its revenue and gross profit margin are in line with expectations, and has set a goal for 2019 to achieve a revenue growth rate higher than the target market and achieve sustainable profitability.

Mr. Jean-Marc Chery, President and CEO of ST

Mr. Jean-Marc Chery, President and CEO of ST, and other senior executives recently said in an interview with Jiwei.com and other media that we believe that the performance in the second half of this year should exceed that in the first half. There are two main reasons for this: First, we are docking and cooperating with customers on some projects, mainly in the automotive and personal electronics fields. According to the progress and results of the current cooperation with customers, we think the financial performance in the second half of the year should be better than that in the first half of the year. Second, it is expected that the industrial market and the mass market will bring us new growth, so this year ST has put its attention back to Asia, especially the Chinese market. Our agents and channel suppliers in the Chinese market can continue to work hard to improve ST's performance in the Chinese market.

What kind of support will ST bring to the Chinese market? ST executives said that China's traditional industries and traditional economy are currently in a stage of steady growth. With the emergence of more and more new industries and new formats, including the Internet of Things, Industrial Internet of Things and equipment interconnection, the country has also introduced corresponding laws and regulations in the process of the continuous rise of new industries. Therefore, ST will continue to work hard in artificial intelligence and sensors to help the development of China's industrial Internet. We hope that such help is complementary, and ST and the Chinese market should grow together.

Unaffected by short-term fluctuations, STM32 incorporates AI elements

The microcontroller (MCU) market is a dynamic market both in China and around the world, and ST is the leader in this market. According to the IHS report, STM32 is the number one microcontroller brand in China, with the highest market share. In 2018, ST shipped more than 1.2 billion STM32 microcontrollers, with an annual compound growth rate of more than 30%.

However, as mentioned above, the semiconductor industry is in a trend of declining prosperity, but ST is still confident of outperforming the general trend. ST executives said that even though our market is in a relatively weak stage now, the entire market has not yet reached the lowest level, and we also hope that there will be a strong rebound in the second half of this year.

To this end, while gaining insight into the market, ST believes that new products must be launched, and STMicroelectronics will launch more products based on STM32 this year. ST executives said that this can help us bring more secure solutions and more artificial intelligence solutions. We will also pay more attention to the introduction of new products in the Chinese market, which can help the company's future development.

Why does ST do this? ST executives said that because all the major trends have arrived, the market may be full of challenges this year. Our entire company hopes to show everyone our resilience through the launch of new products this year. STMicroelectronics will continue to invest heavily in R&D this year. Every year, ST continues to invest 16% of its sales in R&D, and continuously strengthens the R&D of equipment and productivity.

ST executives said that more and more cash will be injected into ST's current R&D system, which can really help technology and product development. STMicroelectronics believes very much in future development and hopes to embrace the general trend of the electronics industry without being affected by short-term fluctuations.

Focus on four major markets, ten-year supply commitment

From the perspective of overall development strategy, ST hopes to better focus on the four major terminal markets or some strategic application scenarios. This is also the driving force for ST to actively embrace the general trend and achieve rapid development.

ST executives said that among the four major terminal markets, the first is the automobile market. Nowadays, small mobile bicycles and rental cars are already very convenient. Under the trend of smart mobility, not only bicycles, but also cars and buses, ST will also bring more intelligent transportation solutions.

The second is the Internet of Things, mainly the Industrial Internet of Things. Through existing processor solutions, especially STMicroelectronics' STM32, we can continue to support the development of the Industrial Internet of Things.

There are also two major terminal markets, namely personal electronics and communication equipment, and computers and peripheral products. In terms of personal electronics, ST hopes to eventually enter the terminal market of personal electronics. ST's main solutions are through sensors, security solutions, and products including analog signals; in addition, there are also communication equipment, especially in the future 5G network deployment, which can realize satellite communication and information transmission, which will be a huge market.

ST believes that our strategic focus in these markets is not only to sell products, but also to bring customers a wider product portfolio to solve their pain points. ST revealed that there are currently more than 170 partners who are constantly improving its ecosystem, which is the DNA of STM32. As of the end of 2018, STM32 has 14 series and 700 models in production, continuously enriching the STM32 ecosystem and enabling more than 60,000 customers; by the end of 2019, it is expected that 15 series and 900 product models will share a complete ecosystem.

More importantly, ST will provide a ten-year supply commitment for these products. ST executives said that if customers purchase its products in the current year, ST will promise to continue to produce this product in the next ten years. For ST, based on the huge market supply demand, it needs very strong production capacity. From the perspective of production capacity, ST has its own internal wafer fab, and we also work closely with many manufacturers.

ST executives said that we will continue to listen to the market and ensure that the technologies under development are developing in the right direction for the market; at the same time, we will maximize the efficiency of resource utilization, help stabilize production, provide the production capacity required by the market, and will not be affected by market supply and demand. We can make a commitment to customers to continue production for ten years.